New Straits Times, 2009/08/18
KUALA LUMPUR: Retailers have been instructed against lowering the prices of four subsidised products to protect smaller businesses.
Sugar, bread, all-purpose flour and cooking oil are not allowed to be sold below their fixed price from Aug 1, the Domestic Trade, Co-operative and Consumerism Ministry said in a recent circular.
Typically, hypermarkets and other big retailers have been holding promotions where they sell these items below the fixed price to woo more shoppers.
A copy of the circular obtained by New Straits Times stated that retailers were not allowed to advertise subsidised control items and had to stick to the price list.
The ministry's secretary-general, Datuk Mohd Zain Mohd Dom, when contacted, said the action was taken to help small retailers by creating a level playing field for them to compete with larger rivals.
He said hypermarkets were buying in bulk and were willing to sell at a loss. This had resulted in smaller retailers not being able to make money on these items.
This year, the government will spend RM1.91 billion to subsidise the four products -- much higher than last year, as sugar was included as a subsidised product this year at a cost of RM720 million to the government.
An industry executive said the move to stop anyone selling below the listed price was to suppress demand, especially since several festival celebrations were coming.
Any additional demand would involve the government having to fork out more money to subsidise the items, he said.
However, if this was the case, the directive would not work because the four items are basic goods and demand for them stays the same whether the price goes up or down, said chief economist at RAM Holdings Bhd Dr Yeah Kim Leng.
Bank Islam economist Azrul Azwar Ahmad Tajudin said the government move was puzzling.
The generosity of retailers and wholesalers in selling these controlled items below cost would go a long way to relieve the people's burden, he said.
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